Exclusive: Facebook Deal Nets Instagram CEO $400 Million

Share

Exclusive: Facebook Deal Nets Instagram CEO $400 Million

Photo: Ariel Zambelich/Wired

Photo by Ariel Zambelich

Facebook's acquisition of the immensely popular photo-sharing service Instagram for $1 billion is far and away the largest acquisition in the history of the world's largest social network. But for CEO Kevin Systrom and company, it's a windfall payday like none other.

CEO Systrom owns 40 percent of Instagram, according to a source close to the company, who provided Wired with figures from 2011. That will net Systrom $400 million to take home as a result of the deal. Co-founder Mike Krieger holds about a 10 percent stake, and will net around $100 million. Benchmark Capital, the venture capital firm which led Instagram's Series A funding round in 2011, has about an 18 percent stake, netting roughly $180 million from the deal. Andreessen Horowitz and Baseline Ventures, two investment firms backing Instagram, each have about a 10 percent stake, netting just under $100 million apiece.

The rest of the company's 13 full-time employees will each get a portion of a nearly $100 million pool, with specific amounts awarded by how long the employee has worked at Instagram.

Announced early Monday, Instagram's acquisition by Facebook is a huge win for a small, young company with a massive user base. In the two years since Systrom and Krieger founded Instagram, the photo-sharing app has exploded to a user base of over 30 million on iOS alone. Last week, the app finally became available to Android users for the first time, prompting over 1 million new user signups in the first 12 hours of release.

"This is an important milestone for Facebook because it's the first time we've ever acquired a product and company with so many users," Mark Zuckerberg wrote on his own Facebook page. "But providing the best photo sharing experience is one reason why so many people love Facebook and we knew it would be worth bringing these two companies together."

Facebook was also quick to insist that it would not just make Instagram an appendage of Facebook, anticipating the consternation of the photo-sharing service's legions of fans. "[W]e're committed to building and growing Instagram independently," Zuckerberg wrote. "Millions of people around the world love the Instagram app and the brand associated with it, and our goal is to help spread this app and brand to even more people.

Instagram echoed the message: "It’s important to be clear that Instagram is not going away."

It's an unprecedented acquisition for Facebook, and one that Zuckerberg says likely won't happen again. "We don't plan on doing many more of these, if any at all," the CEO wrote in his Facebook status update. Though Facebook is certainly not shy to talent acquisitions; among others, Facebook purchased Gowalla late last year, as well as social service Hot Potato in 2010. However, Facebook only had to spend in the tens of millions on both acquisitions — nothing like the cool billion it dropped on Instagram.

Facebook users have long complained that the company's mobile application for the iPhone, Android and other mobile OSes was terrible, and popular speculation suggested that the company would one day acquire a more polished mobile app. Many assumed that Path – the social app created by former Facebooker Dave Morin – would be the app Facebook would acquire, as it encompassed photo sharing, social discovery and check-ins in a well-designed mobile interface. Morin even turned down a$100 million dollar acquisition offer from Google at one point, reportedly because of unfavorable terms in the deal as requested by Google.